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  1. Budget 2018: From income tax slabs, exemption limits to home loans, in hard figures, here’s what taxpayers want from FM Arun Jaitley

Budget 2018: From income tax slabs, exemption limits to home loans, in hard figures, here’s what taxpayers want from FM Arun Jaitley

Budget 2018: Everyone from salaried class to small traders is hoping for a few tax benefits to be given by Finance Minister Arun Jaitley in the Budget 2018 that will make their life easier.

By: | Updated: January 20, 2018 12:36 AM
Budget 2018: What taxpayers expect from FM Arun Jaitley in this year's budget Union Budget 2018, which will be presented on February 1, will be the last regular budget ahead of the general elections in 2019, making it a significant one.

Budget 2018: Every budget brings it shares of anticipation and excitement, and the Union Budget 2018 is going to be no exception. While the budget encompasses a detailed financial strategy for the economy as a whole, most of us still wait for the Finance Minister to drop the tax announcements. The Union Budget 2018, which will be presented on February 1, will be the last regular budget ahead of the general elections in 2019, making it a significant one. Naturally, everyone from salaried class to small traders would be hoping for a few tax benefits to be given by Finance Minister Arun Jaitley in the Budget 2018 that will make their life easier.

Let’s take a look at some wishes from the tax payer:

Lower Tax Slabs & Hike in Exemption Limits

Currently, individuals earning up to Rs 2.5 lakh per annum are exempted from any tax. However, as the cost of living has gone high with no corresponding effect on income, the expectation is a modification in the current tax slab structure and widening in the annual income brackets, which would be in line with the cost of living standards.

In particular relief needs to be given to the middle-income group who are paying 20% tax on their taxable income. Below is an expectation chart for the tax slabs as opposed to what it is currently.

Current Income Tax Slabs

 

Income Group  (In Rupees)

Current Tax Slab (In %)

0 – 2,50,000

Nil

2,50,000 – 5,00,000

5%

5,00,000 – 10, 00,000

20%

Above 10,00,000

30%

Expected Income Tax Slabs

Income Group  (In Rupees)

Desired Tax Slab (In %)

0 – 3,00,000

Nil

3,00,000 – 7,00,000

5%

7,00,000 – 12, 00,000

20%

Above 12, 00,000

30%

While exempting a large chunk of the population completely from tax is detrimental from the revenue point of view for the government, what it can do is increase exemption limits under various sections to help people save taxes. Currently, a tax payer can avail deduction up to Rs 1.5 Lakh per year under Section 80C, 80CCC and 80 CCD(1) as per Section 80 CCE of the Income Tax Act. There should be an increase in this limit in the Budget 2018 to anywhere between Rs 2 and Rs 3 lakh and possibly more for women to prevent them from stocking up on gold or liquid money and instead invest in tax saving schemes.

Watch video: 5 blockbuster income tax moves to expect in Budget 2018

Section 80D Revision on Exemption

The exemption limit of Rs 25,000 is unlikely to be increased for individuals paying for health insurance. But when parents are insured, especially if they cross a certain age, the premium shoots up. If you pay the premium for your parents if they are above 60, it gives you an additional exemption of Rs 30,000. This limit needs to be increased possibly to Rs 35,000 or 40,000 in the Budget 2018.

Moreover, for the benefit extended to very senior citizens (above 80 years), there are only a few tax payers who have crossed that age and can hence enjoy the benefit of claiming expenses incurred for medical treatment upto Rs 30,000 under Section 80 D. Hence, this tax benefit is ineffective to many senior citizens who are between 60 and 80 years of age. FM Jaitey should extend it to all those individuals that have completed 60 years of age and provide more security and in-hand income to them.

Bring NPS Under EEE Regime

The National Pension Scheme (NPS) is a great return scheme but continues to be unattractive largely due to taxation of at least 20% of corpus at the time of withdrawal. Besides, a majority must be mandatorily parked in an annuity. The government must allow a higher corpus to be withdrawn without tax implication and also raise annuity rates for NPS. Considering NPS is pitched as an alternative to PPF which falls in the EEE category, it is only fair to bring NPS under the EEE regime.

Read Also: Budget 2018: For income tax returns payment relief, common man eyes Section 80C hike by FM Arun Jaitley 

Separate Tax Exemption For Term Insurance

Term plans have become unattractive for most people, especially the younger lot, who see no return on investment or added tax benefit on such schemes. But even with the soundest of financial planning, something can go wrong, and hence when you are not there to take care of the situation, let your family not be hassled by financial worries and opt for term insurance.

A separate exemption limit for term insurance premium over and above that of Section 80C of the I-T Act, which is Rs 1.5 lakh, should be made. This will not only attract more people to invest in the scheme but also allow for people to secure the future of their families through the policy.

Separate Exemption For Principal Repayment on Home Loans

Currently, you can claim deduction of up to Rs 1.5 Lakh on repayment of the principal amount on housing loans on residential property under Section 80 C. However, this section is already overcrowded with other deductions such as contribution to PPF, investment in NSC, tax-savings funds and more. Over the years, the cost of properties have significantly increased, leading to higher EMIs for home loans. Hence, the government should create a separate exemption limit for such deductions to provide better tax relief to home buyers.

Increase Medical Reimbursement Limit

Medical reimbursement is a great way to save tax when structuring your salary. But the current limit set at Rs 15,000 is remarkably low for the high medical expenses that have shot up in the last decade. This limit was set years back and is not relevant at the moment. The tax payers expect the limit to be extended possibly anywhere between Rs 25,000 and 40,000 in the Budget 2018.

Revise Repayment Window For Education Loan

The interest paid on education loan can be claimed as tax deduction under Section 80E. However, this benefit is available only for eight years. Considering the benefit was introduced in 2006 when the cost of education was much lower than what it is now, the window for tax deduction must be extended as one might need a longer period of time to pay off the loan. Moreover, a lot of working professionals are opting for executive education, making the repayment window inconvenient for them as they already have family expenditures to take care of.

(The writer is CEO at Bankbazaar.com)

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